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Commodities Roundup: EUROFER critical of rising quotas; Trump seeks more rare earth magnet sources; aluminum’s outlook mixed

07/26/2019 By


For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

EUROFER pessimistic on EU growth, steel safeguards

The European Steel Association reiterated arguments that the European Union’s steel safeguards imposed this year, and the scheduled quota increases within them, are not enough to protect the bloc’s steel industry.

“Given these economic and market conditions, the European Commission needs to act now to adapt the steel safeguard measures to reflect these circumstances,” EUROFER Director General Axel Eggert said. “The repeated rises in the size of the quota this year and next are completely out of step with the sluggish steel market.”

In its recently released 2019-20 steel outlook, EUROFER forecasts a 0.4% decline in final steel use for 2019.

The industry group also forecasts that the EU will see a GDP growth of 1.4% in the third quarter of 2019.

U.S. targets China’s steel rack imports

The U.S. Department of Commerce announced recently that it had made affirmative determinations in its anti-dumping and countervailing subsidy probes of steel rack imports from China.

The DOC said imports of the steel racks benefited from countervailable subsides ranging from 1.50%-102.23%. In addition, the DOC said racks were dumped into the U.S. at less than fair value at rates ranging from 18.06%-144.50%.

The DOC said the imports of steel racks were valued at $200 million in 2017.

U.S. steel sector capacity utilization rate

The U.S. steel sector’s capacity utilization rate for the year through July 20 reached 81.1%, according to the American Iron and Steel Institute (AISI).

The steel sector produced 54.2 million tons for the period, up 5.0% from the 51.6 million tons produced during the same period in 2018.

Global aluminum production slips

The International Aluminum Institute reported global production of 5.25 million tons in June, down from the previous month’s total of 5.43 million tons.

China produced 2.96 million tons, down from 3.05 million tons in June 2018.

U.S. seeks alternative sources of rare earth magnet

Rare earth magnets have a variety of uses, including military applications.

In light of China’s dominance of the rare earths market, President Donald Trump issued a declaration calling for the Department of Defense to begin searching for alternative sources of samarium cobalt rare earth magnets (which are resistant to high temperatures, among other qualities).

“The Department of Defense will take actions to develop and purchase equipment and materials needed for creating, maintaining, protecting and expanding production capability for Samarium Cobalt Rare Earth Permanent Magnets,” Trump said in a letter to Rep. Maxine Waters and Sen. Mike Crapo, heads of the House Committee on Financial Services and the Senate Committee on Banking, Housing and Urban Affairs, respectively.

Aluminum outlook differs for short term, long term

What’s in store for aluminum markets?

In the short term, aluminum’s fundamentals are not promising, MetalMiner’s Stuart Burns explained earlier this week.

“The aluminum price has drifted lower this year, depressed more by investor fears of a slowing global economy and, in particular, by the impact of the ongoing trade war on the world’s top producer and consumer, China,” Burns wrote.

Taking a more long-term view, however, aluminum’s prospects are a little brighter.

“Global demand is growing, albeit not at the level it was earlier in the decade,” he continued. “The market remains undersupplied, as demand is exceeding production to the tune of some 1.5 million-1.7 million tons per year.

“The shortfall is being met by shadow stocks held by the stock and finance trade, which built up following the financial crisis of 2008 and are gradually returning to the market. In Jefferies’ estimation, global inventories are reaching lows not seen since 2007. So far, this has not impacted either metal prices or investor appetite for the metal.”